The startup story is a 21st Century fairytale that began in Bengaluru. BW Businessworld does a reality check on the hubs that now offer the most promising ecosystem

Which city comes to your mind when you think of a startup – Bengaluru? Recently, while talking to a startup founder in Bengaluru, I learnt of a new trend bolstering the Indian startup ecosystem, reinforcing the ‘Bengaluru v/s Delhi’ rivalry, we hear of these days.

Launching a startup can be tricky. It’s a little bit like walking in a minefield, where one wrong step could blow everything up, which is where choosing the ideal base camp comes in. Entrepreneurs generally get stuck with the idea of setting up shop in Bengaluru, without realising that there are many other cities in India suitable for business.

Startup teams from cities like Mumbai, Bengaluru and Hyderabad are moving down to the capital with a funded idea or even just an idea. Delhi and the national capital region (NCR) has evolved into a spacious turf for startups of late. We take a look at the Indian cities that have attracted most attention in 2016, when the funding environment was more measured and cautious than it was in exuberant 2015.

Ramesh Dhamija, founder of a web-designing tech startup, shed some light on a trend that is fast catching-up. “It’s true that Bengaluru is a fantastic launch pad for tech-startups of any kind,” he said, “but when brainstormed on which city we would like to see as our headquarters sooner or later, we shortlisted New Delhi/Gurgaon. So, it seemed like a good idea to set up our first office in Delhi rather than Bengaluru.” Dhamija went on to say that startups preferred to be where competition was not too stiff, “so they wouldn’t have to struggle to win each client or project, initially when the team is learning.”

Disruptive DelhiWhen asked about a startup hub that was maturing at the fastest pace, most active investors in the country said, “Bengaluru has been the largest startup hub till date and the Delhi/NCR follows close behind.” They ranked Mumbai, Hyderabad and Chennai after the two leading startup hubs, in that order. Surprisingly, in the first six months of 2016, startups in the Delhi- National Capital Region attracted almost twice the amount raised by those in Bengaluru.

The Delhi startups account for nearly half the $1.8 billion raised by Indian startups in 2016 so far. Vikram Gupta, Founder, IvyCap Ventures, pointed out that “Bengaluru has also seen proportionately larger number of failures.” He said, “From sector perspective, one would see high growth in healthcare, fintech and pure tech companies,” adding,“that’s the reason you would expect companies like Bluestone, Clovia, Purplle, FTCash, Leixir and Vinculum to do extremely well.”

Research firms Tracxn.com and Angel List have compiled a list of startups in the four metropolises, comparing the total amount of funds each were able to raise by mid-year in 2016.

Over the past couple of years the startup population in India has shot up considerably from 3,100 in 2014 and is projected to cross 12,000 by 2020. It’s easy to see that startups are giving birth to more startups. Enablers, Incubators and Accelerators are providing startups with growth advice and decision-making tools. They help young ventures grow into mature players, offering advice on everything from dealing with government policies to how to act as market catalysts.A report titled, Global Startup Ecosystem Ranking by San Francisco-based, Compass (a research firm for global benchmarking tools), says altogether $2.256 billion of venture investment had been made since 2015-16, making India the seventh biggest investment destination in the world.

Speaking to BW Businessworld, Neeraj Kumar Singal, CEO of SEMCO Group, said, “A number of factors are driving the fast paced growth of the India startup ecosystems, such as evolving technology and a comprehensively large market. He too rated Bengaluru as the most successful startup hub in the country, followed by Delhi, Mumbai and Chennai, in that order.”

Singal suggested that startups related to artificial intelligence, virtual reality and robotics, would do well. Singal felt that startups like StaqU, Arya.a and Smartvizx had the potential to do well in the near future.

Reality Check on RegionsThis year, the Delhi-NCR region clearly takes the lead in attracting startups, with the most number of rounds across all funding stages. Big names like the Ibibo Group, Snapdeal, Shopclues, MobiKwik and Koovs, have raised investment ranging from $32 million to $250 million. Ahmedabad, Chennai and Jaipur are, meanwhile, turning into startup hubs too, by securing early stage funding rounds for many startups and notable late stage rounds for others this year. The upcoming cities have thrown up startups like Stayzilla in Chennai and CarDekho in Jaipur.

Startups have become so ubiquitous that it is not unusual to go to a coffee shop and be flanked by startups teams discussing their business proposals, or signing up joint bank accounts. These group gatherings are a common sight now across not only Bengaluru, but also Mumbai and Pune, Gurgaon and Delhi and Chennai. A budding ecosystem demands a well-established network of founders, entrepreneurs, investors, mentors and venture capitalists, which is occurring in both formal and informal fashions.

MobiKwik COO, Mrinal Sinha, too rated Bengaluru as the top hub for startups, followed by Delhi, Mumbai and Chennai, in the light of the changes in their respective environments. Mumbai used to be ahead of Chennai. Chennai is making a mark on the startup scenario with a fresh crop of IT startups. Delhi is home to quite a few successful startups, while Bangalore has great engineering colleges that are helping its ecosystem to thrive.

A lot of good ideas are whirling about, like The Startup Cricket League, pioneered by SaiKiran Gunda. Gunda belongs to Bangalore, but has facilitated these events in other cities as well. Conferences organized by IvyCamp get an overwhelming response from various cities and vindicate the enthusiasm at the startup hubs.

Emerging HubsThe startup capital Bengaluru, has been an all-time favourite for investors, because tech talent was easily available in the city. Cities like Ahmedabad, Chennai and Jaipur are the emerging newcomers. They too are turning into hubs for startups and accounted for 30 deals in 2016, with a total funding of $34 million. Between 2010 and 2014, the infusion of venture capital (VC) and private equity (PE) increased from US $13 million to $ 1,818 million. Angel investment too has multiplied by nearly eight times, from $4.2 million to $32.2 million.

Anil Chhikara of Jaarvis Accelerator predictively rated Bengaluru as the topmost hub, followed by Delhi, Mumbai and Chennai. “A healthy startup ecosystem needs all the right ingredients in the right mix,” he said, “successful entrepreneurs turned angel investors, examples of startups at all stages, from the early stage to funded, scale-up to acquired or closed down, a strong talent pool, easy access to different kinds of mentors, startup incubators and accelerators and ample opportunities to network through events and meet ups.”

Chhikara runs mentorship programmes for startups. “I believe the kind of startups that will succeed and flourish are those that are more focused on solving real problems and not just minor irritants,” he said, adding, “the kind of problems that customers will not only be willing to pay for use but will get so used to that they will be disappointed if not available. These startups will not be dependent on VC money to survive. In fact VC money will chase them as the money can be used to scale up and increase market penetration and domination.”

The factor that has made India most attractive to foreign investors is consumer growth, backed by the mobile revolution. Betting big on Indian innovation has become a global point of interest. The year 2015 witnessed the maximum traction in this space, when more than 600 companies secured funding, of which more than $2 billion was deployed by PE and VC funds.

But is launching a startup really a 21st Century fairytale? If it really was a foolproof rags-to-riches tale, in which anyone with the right skills and determination could achieve something impactful then why do startups fail? Unfortunately, most founders get taken in by the sex appeal of startups and stick to solving those “small irritants”, instead of the “real problems”. Building up a startup in 2016 is as hard as it was before – only the exposure to the business and its glamour quotient has increased!